Economic Advice for Obama
For Mr. Obama to avoid being a one-term president, he should start operating more like Ronald Reagan and forget about seeking economic advice in the editorial pages of The New York Times.
Job creation promises to be the top issue in the upcoming presidential campaign and what hasn’t worked is the trillions in stimulus money and a flood of red ink. The U.S. economy has lost 2.2 million jobs since President Obama took office.
What Reagan delivered was real "Hope" and "Change," not just two words on a campaign poster with nothing to back them up.
Shifted into high gear by a 25 percent across-the-board tax cut, the economic expansion during the Reagan years, 1981-1989, created 17 million new jobs. Unemployment dropped from 7.6 percent when Reagan came into office to 5.5 percent when he left.
Real family income per year, adjusted for inflation, grew by $4,000 during the Reagan years, after no growth in the pre-Reagan Carter years.
For the poor, stagnation and joblessness turned into upward mobility. The Treasury Department reported that 86 percent of the poorest 20 percent of households in 1980 had moved to higher income quintiles by 1989.
Further increasing economic well-being, paychecks increasingly held their value as inflation dropped from 13.5 percent in 1980 to 4.1 percent in 1988.
In the June 6 edition of Weekly Standard magazine, David Smick, editor of the International Economy magazine, quotes what Ronald Reagan stated in late 1979 in an economic strategy meeting for his upcoming presidential campaign.
Reagan was told that rival candidate John Connally, former governor of Texas, was gaining support from the nation’s corporate CEOs.
"Let him have the Fortune 500," replied Reagan. "I want our campaign to stand for Main Street, not Wall Street. I want us to stand for the worker, the shopkeeper, the entrepreneur, and the small businessman."
Obama takes the opposite stance, surrounding himself with the titans of Wall Street, the same people who nearly drove the nation off a cliff in 2008.
In January, President Obama tapped General Electric CEO Jeffrey Immelt as his top outside economic advisor to guide him in his efforts to boost lackluster job creation. General Electric cut 34,000 jobs from its payroll from 2000 to 2009.
"The 2012 presidential race should put the ‘small’ and the ‘new’ against the ‘large’ and the ‘well connected.’ It should be a contest between the small town populist and the corporate elitist models of America’s future," states Smick in his Weekly Standard article.
"With one exception, every economic player in Washington has a lobbyist," says Smick, "The one exception? Those innovative, job-creating firms that are yet to come into being. They exist only in people’s dreams and imaginations. These innovators are America’s only hope of pulling out of today’s economic mess, and they desperately need someone in Washington to champion their cause."
Rather than seeking answers from Goldman Sachs and General Electric, President Obama should be taking advice from the small business community, the sector that employs half of the nation’s private sector workers and consistently creates the vast majority of the economy’s new jobs.
And that doesn’t mean bringing some small business owners from Obama’s donor lists to Washington to sit there as props as the president delivers another speech about what a bad hand he was dealt.
When it comes to business, especially small businesses, Obama doesn’t know what he doesn’t know. His job now is to listen to Main Street.
"Who in their right mind in today’s highly uncertain tax, regulatory, monetary, health care environment," asks Smick, "would take the risk of striking out with a new venture?"
He’s right. The May 2011 survey by the National Federation of Independent Business of the nation’s owners of small businesses shows the worst hiring prospects in eight months.
The owners cite "taxes" and "government requirements" as key obstacles to job creation.
Ralph R. Reiland is the B. Kenneth Simon professor of free enterprise and an associate professor of economics at Robert Morris University in Pittsburgh.
Ralph R. Reiland
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